Friday, January 17, 2020

Does ABS-CBN have tax deficiencies, unpaid debts?

President Rodrigo Duterte has repeatedly threatened to block the franchise extension of ABS-CBN Corp., creating uncertainty over the fate of the broadcast giant’s business.

The media company is now racing against time as its franchise will expire in March this year. A bill to extend its license for another 25 years is pending in Congress. In attacking ABS-CBN, Duterte accused the company of bias and of “swindling” him by not airing his paid political advertisement during the 2016 election campaign.

He also previously said that Lopez Holdings Corp., the parent of ABS-CBN Corp., has unpaid obligations to state-run Development Bank of the Philippines. Meanwhile, supporters of the president on social media accuse ABS-CBN of not paying the right taxes. Does ABS-CBN have unpaid dues?
Judicial records show that since 2018, ABS-CBN and its units have entered into four “compromise agreements” with the Bureau of Internal Revenue to settle its arrears.

A compromise agreement is a contract whereby the parties make reciprocal concessions in order to resolve their differences and avoid, or put an end, to a lawsuit. All four compromise agreements were approved by the Court of Tax Appeals. Meanwhile, the resolution on a tax case between ABS-CBN Film Productions Inc. and the BIR filed before the CTA on Dec. 6, 2018, is yet to be made public.

What’s inside the four compromise agreements?
ABS-CBN Corp. vs Commissioner of Internal Revenue In a Feb. 27, 2019, resolution from the Second Division, the tax appellate court said the BIR accepted ABS-CBN’s offer to pay a “judicial compromise amount” of P152.4 million.

The amount is equivalent to 40% of ABS-CBN’s deficiency in income tax, value-added tax, and documentary stamp tax payments as assessed by the BIR. ABS-CBN Chief Financial Officer Aldrin Cerrado was authorized to enter into the compromise agreement with the BIR.

ABS-CBN Film Productions Inc. vs Commissioner of Internal Revenue In a July 31, 2019, resolution by the First Division, the CTA said the ABS-CBN unit will pay the BIR a compromise amount of P16.1 million. The court said the application to settle was grounded on “doubtful validity of respondent’s (BIR) assessment.”

The BIR was found to have failed to demonstrate that the company received taxable income from any property, activity, or service equivalent to the tax deficiencies. “Absent any empirical evidence that the alleged differences in the data matching were indeed taxable income received by the petitioner, said deficiency assessments were mere presumptions.” ABS-CBN Film Productions Inc. vs Commissioner of Internal Revenue

In a Nov. 23, 2018, decision of the Second Division, the BIR accepted the offer of the film production unit of ABS-CBN to pay a compromise amount of P3 million.

ABS-CBN Publishing Inc. vs Commissioner of Internal Revenue In a Jan. 22, 2019, resolution by the Third Division, the CTA said the ABS-CBN subsidiary agreed to pay the BIR a compromise amount of P30 million.

Lopez Holdings: No unpaid debt
Meanwhile, Lopez Holdings in 2017 denied Duterte’s accusation that Benpres, the holding firm’s former name, is among the companies that have unpaid debts to government banks. "Lopez Holdings Corp does not have any unpaid obligations to the Development Bank of the Philippines or other government financial institutions," the company said in a statement.

"All debt papers, including those sold by DBP to the SPV were eventually settled by the company," it added.